SEPTEMBER 2019

BUILDING NEWS

THE OFFICIAL MAGAZINE OF THE HOME BUILDERS ASSOCIATION OF METRO PORTLAND

Well built, well designed (skinny) homes

BY: ADRIAN MCCARTHY, HBA STAFF WRITER

 

During the 2019 Oregon legislative session, lawmakers passed SB 534 – Residential Narrow Lot Development that creates more opportunities for narrow lot, skinny house development than had been previously allowed. With the new rules taking effect on March 1, 2020, Port land area homebuilders – like Fish Construction and Renaissance Homes – are looking forward to building homes on the estimated 14,000 legally platted “skinny” lots in Portland. And while the legislation provides some new opportunities in the skinny house market, builders like Fish and Renaissance have spent decades refining and improving the design and quality of these homes. We sat down with Justin Wood of Fish Construction and Jeff Schrope of Renaissance Homes to learn more.

Land cost is a large contributing factor to housing cost. What else helps minimize costs and increase affordability on a skinny lot other than just cutting the land price in half?

Justin: Land cost is cheaper for sure on skinny lots but it is not half. Generally, it has been my experience that in my price range the skinny lots tend to be about 25% less on average than a SO-wide lot. This for sure is one of the major points that helps to keep these homes affordable. Additionally, the fact that we are generally constrained by size, it is harder to get more than about 1 500 – 1600 SF on one of these skinny lots so we are naturally building smaller homes than we could otherwise build on a larger lot. Further, the City of Portland has programs in place to waive SDC’s and discount property taxes (tax abatement) when we sell a home for less than the median home price for our area and to a family making less than the median family income. Because of the lot prices and sizes mentioned above, skinny homes I have found are about the last home we can build and sell and stay under the price cap (which is $395,000 now).

Can you split any SK lot into two 2500 lots? Or does the legislation only apply to historically Platted 2500 lots? Are there additional lots this might apply on other than 5k lots? For instance, when looking at an SK lot, building 3 homes instead of one?

Jeff: Generally speaking, you cannot split a SK lot into two 2500 sf lots; however, there are special circumstances where you can. For the most part, if you have a SK lot it’s a SK lot. Depending on zoning and how much property you have, you can split lots into 2, 3 or more lots.

Justin: The majority of the skinny lots in Portland are in what is called an RS zone. This is designated that lots on HBApdx.org September 2019 HBA HOME BUILDING NEW average should be around 1 home per every 5,000 sf. In the RS zone you cannot split a single 5,000 sf lot into two 2,500 lots. However, If the lot has two underlying legally platted skinny lots then you can build two on it. In the R2 .5 zone it’s more straightforward – you can split one 5,000 sf lot into two 2,500 skinny lots, because the zoning already allows for it.

The design of skinny homes has improved over the last decade or so, preempted by a design competition by the City of Portland. Even though there were some unordinary concepts that emerged from the competition, what was positive that came out of that competition? What are other builder-driven design elements that emerged from skinny home builders like yourself?

Justin: I think the main thing that has changed is that we have really had to work to improve the front facade of the home. The garage used to stick out quite a bit from the front of the home and it really dominated the facade. We have had to move the garages back, improve the front porches, add more design elements to the front bedroom as well as second floor windows. If you look at a skinny home from 10 to 15 years ago to now, you will see how much the front facing the street has improved with design quality. As for the competition, I think some good ideas about layout and flow of the home came out of it, I think all of us took away some interesting ideas that we had not otherwise considered. I don’t think any of the plans that were a part of the competition remain in use today because they were cost prohibitive compared to other plans we have.

What is your perception of neighborhood response after a good product has been built?

Jeff: We usually get a good response from the neighbors once the homes are built. We try to fit into the neighborhoods the best we can but you cannot make everyone happy because not everyone wants you there. Justin: The majority of time, I think neighbors ultimately accept the new homes in their neighborhood and think they add to the quality of the neighborhood. When we have a neighbor who is upset, we try to tell them the benefits that our home brings. Generally, we are providing an affordable new home and housing to a region that desperately needs it without creating sprawl – most of the neighbors, while they don’t want to see their street change, accept this point.

What are the considerations of on street parking vs off street parking?

Jeff: All our skinny homes have a one car garage and one parking space in the driveway. For the one car space we are removing from the street, we are adding a total of two spaces. We believe buyers want a garage. Justin: I agree. I personally prefer a driveway – but from my understanding the city might move toward to not allowing garages on these types of homes. Stay tuned.

In a skinny house, what design details become more challenging (i.e., window placements, staircase, flow, etc.)? What are the tradeoffs? And benefits?

 

Jeff: All the above become challenging. There are only so many ways you can design a skinny home. The HBApdx.org September 2019 HBA HOME BUILDING NEWS tradeoffs are a home buyer can get a home in a location that they traditionally might not be able to afford. Also, some people don’t want a large home or less landscaping. These homes can live easier because of the size and that fits a segment of the population. Justin: It is hard with a skinny home to really differentiate your home from a lot of others because when you add in some of the required elements into a 15′ wide home, you really end up with very much the same size and number of rooms. It is important to try and maximize every inch of space and to try and add design touches where you can to set you home apart. For example, we have figured out how to have a nice sized master bedroom with a master bath and walk-in closet. Many plans do not have a walk in closet and I think this is something that sets our plans apart.

If you were already building on these lots in Portland, why was this legislation needed and what challenges could still arise?

Justin: The City of Portland has a Residential Infill Project (RIP) in place that is examining all kinds of housing types and regulations. Currently, the proposals in the draft form of RIP recognize these skinny lots but were recommending new restrictions on what type and size of houses could be built on them. Of more concern is the fact that some on the City Council were wanting to override the RIP recommendations and stop allowing any development on skinny lots except for ones in an R2 or R2.5 zone. This would have impacted thousands of lots and further hurt our ability to build more affordably priced homes in the City. Jeff: With the new legislation, I’m curious to see what the reaction is from the City of Portland. Just because the bill allows building on these tax lots doesn’t mean the City will allow the type of building that the people of the City need. It could be that the city requires these lots be built attached and not allow the market to dictate what is needed.

 

Here is another new project.

With phase one complete, we are now moving forward with Baker Creek East Phase 2 in McMinnville which will feature approximately 50 lots with homes ranging from 1800-2500 square feet.  Stafford Homes and Land will be building the majority of the homes and North West Dream Homes and Black Hawk Homes will be active participants as well.

 

 

 

 

 

Stronger home sales boost builder confidence in May

CNBC is reporting that builders confidence is the highest since last October.  This definitely reflects the trend that we’re seeing with builders moving forward with larger scale projects.

Stronger home sales boost builder confidence in May

Published Wed, May 15 2019 10:00 AM EDT

Key Points

  • The nation’s homebuilders are reporting a rebound in sales, and that is making them more optimistic about the housing market.
  • Builder confidence in the newly built, single-family home market rose 3 points to 66 in May.
  • That’s the highest reading since October.

Construction on a single family home in Tiskilwa, Illinois.

Daniel Acker | Bloomberg | Getty Images

The nation’s homebuilders are reporting a rebound in sales, and that’s making them more optimistic about the housing market.

Builder confidence in the newly built, single-family home market rose 3 points to 66 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. That’s the HMI’s highest reading since October, but lower than last May’s level of 70. Anything above 50 is considered positive.

“Builders are busy catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply,” said NAHB Chairman Greg Ugalde, a homebuilder and developer from Torrington, Connecticut. “However, affordability challenges persist and remain a big impediment to stronger sales.”

Of the index’s three components, current sales conditions, rose 3 points to 72. Sales expectations in the next six months rose 1 point to 72, and buyer traffic moved up 2 points to 49, the only component still in negative territory.

“Mortgage rates are hovering just above 4 percent following a challenging fourth quarter of 2018 when they peaked near 5 percent. This lower-interest rate environment, along with ongoing job growth and rising wages, is contributing to a gradual improvement in the marketplace,” said NAHB Chief Economist Robert Dietz. “At the same time, builders continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”

Regionally, on a three-month moving average, sentiment in the Northeast jumped 6 points to 57; in the West, it rose  2 points to 71; in the Midwest up 1 point to 54; in the South, it gained 1 point to 68.

Prices in the bay area have fallen for the first time since 2012

As reported recently by CNBC.com, prices in the bay area have fallen for the first time since 2012. While this could be simply a minor correction, it’s worthy to take note of as California has historically led home prices in the Northwest and could signal that we’re not yet done with the correction cycle that started last summer.

The median price of a San Francisco Bay Area home sold last month fell slightly compared with the prior-year period, marking the first annual drop since the bottom of the last housing crash, seven years ago, according to CoreLogic.

In March, the median price was $830,000, down 0.1% compared with March 2018. The decline came as price gains had been shrinking for several months. Before last month, the median sale price had risen annually for 83 consecutive months since April 2012. Both May and June 2018 had the highest ever median sale price: $875,000.

Prices follow sales, and sales have been running extraordinarily low since last summer, when mortgage rates spiked.

“It reflects a trend that began in mid-2018 when home sales slowed and inventory grew, forcing sellers to be more competitive,” Andrew LePage, a CoreLogic analyst, wrote in a release. “The year-over-year increase in the region’s median sale price was 16.2% in March last year. But after that, the gains in the median gradually decreased each month and fell to the 2 to 3% range early this year and then disappeared this March.”

Sales of San Francisco homes – including Alameda, Contra Costa, Marin, Napa, Santa Clara, San Francisco, San Mateo, Solano and Sonoma counties – were nearly 15% lower in March compared with a year ago. That was the lowest March reading in 11 years. Sales have been at 11-year lows since December and have fallen on a year-over-year basis for the past 10 months.

These numbers are based on closings, so they were likely deals signed in January and February. The market should have been improving, as mortgage rates were falling, the government shutdown was over and the stock market was surging.

“Those factors bode well for stronger sales than we’ve seen in recent months, but any impending upswing in activity wasn’t evident in the March data,” LePage said. “Beginning in late spring last year, some potential buyers got priced out and others simply stepped out of the market amid concerns prices were near a peak.”

Buyers overall, and especially in high-priced markets like San Francisco, are extremely interest rate sensitive. The average rate on the 30-year fixed spiked to just over 5% last November, according to Mortgage News Daily, and then fell back again in December. In March it took a deep dive to around 4%, but has since climbed back to around 4.5%.

The next two months will be key to understanding whether all the weakness in prices and sales is due to fluctuations in interest rates, or whether the market has simply hit an affordability wall. Inventory is rising, but largely because homes are sitting on the market longer, not because there are a ton of new listings.

Sales of existing U.S. homes fell in March

As reported in Fox Business News on April 22, 2019, the housing market is still trying to find its’ footing, particularly in the high end product.  The lower end and more moderately priced homes are continuing to surge, which reinforces what we’ve been seeing locally.  The smaller product – generally 1500-2100 square feet – is selling quickly and we’ve got a glut of million dollar plus homes sitting on the market.

Sales of existing U.S. homes fell in March after a huge gain the previous month, held back partly by a sharp slowdown among the most expensive properties.

The National Association of Realtors said Monday that home sales fell 4.9% to a seasonally adjusted annual rate of 5.21 million, down from 5.48 million in February. The drop followed an 11.2% gain the previous month, the largest in more than three years.

Home sales are struggling to rebound after slumping in the second half of last year, when a jump in mortgage rates to nearly 5% discouraged many would-be buyers. Spring buying is so far running behind last year’s healthy gains: Sales were 5.4% below where they were a year earlier.

Most analysts expect sales to rebound in the coming months. Borrowing costs have since fallen back to an average of 4.2% on a 30-year fixed mortgage. And solid hiring is pushing employers to pay higher wages, making it easier for more Americans to afford a home purchase.

Applications for mortgages to purchase homes have been running at a healthy pace in recent months, evidence that final sales should pick up in the coming months. Demand remains strong, with homes on the market for an average of 36 days in March, down from 44 in February.

“We look for a combination of strong demand and lower mortgage rates to support modest growth in sales over the balance of the year,” said Nancy Vanden Houten, senior U.S. economist at Oxford Economics.

Still, a split in the market has emerged, thanks partly to the Trump administration’s tax cut law. Sales increased slightly among mid-priced homes but fell sharply among homes priced at $1 million or more.

Lawrence Yun, chief economist at the NAR, said that the tax changes have limited the ability of wealthier homeowners to deduct mortgage interest payments and property taxes. That’s discouraging sales of more expensive homes.

Developers have built more expensive homes in recent years while pulling back from cheaper properties, even as middle-income Americans are eager to buy.

“The lower-end market is hot while the upper-end market is not,” Yun said.

Properties valued at $100,000 or less, mostly condos, also saw a sharp drop in sales, though that reflects a lack of available homes at that price point. The slowdown among higher-priced homes has occurred because of weaker demand.

Sales fell in all four major U.S. regions, with the biggest decline occurring in the Midwest. That may have partly reflected the impact of massive flooding in Iowa, Missouri and Nebraska last month.

 

MARCH 26TH, 2019

Suntel Design is pleased to announce that they are partnering with Chad E. Davis, Builder and ECON Builders to provide all the architectural planning and construction documents for 31 new single family homes to be built in Forest Grove, Oregon. The homes will range from approximately 1500 to 2000 square feet and all will have at least 3 bedrooms and two bathroom. Most will feature covered patios and island kitchens and construction is set begin soon. Please contact either Chad E Davis or ECON Builders for sales and pricing information.

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